New health care organizations offer reward, risk

Tina Behar, a medical assistant with San Diego Independent ACO, draws blood from patient Richard Dacy, 75, during a diabetic wellness exam at one of the organization's offices in Spring Valley. Dr. Bryan Fox, pictured in the background, is one of 30 doctors participating in the new accountable care organization, which seeks to lower treatment costs, while maintaining quality, for Medicare patients.
— Nelvin C. Cepeda

Tina Behar, a medical assistant with San Diego Independent ACO, draws blood from patient Richard Dacy, 75, during a diabetic wellness exam at one of the organization's offices in Spring Valley. Dr. Bryan Fox, pictured in the background, is one of 30 doctors participating in the new accountable care organization, which seeks to lower treatment costs, while maintaining quality, for Medicare patients.
— Nelvin C. Cepeda

Several local medical groups are on the leading edge of health reform, participating in a new model for Medicare payments that rewards those who can save money without cutting quality.

Embedded in the massive health reform law enacted in 2010 are provisions for the creation of accountable care organizations, which are supposed to help the government tame Medicare spending by giving doctors, hospitals and other health providers an incentive to bill less.

The proposition is simple: Save cash without compromising quality, and Medicare will give you a cut of the savings.

So far the U.S. Centers for Medicare & Medicaid Services has approved more than 250 accountable care organizations, or ACOs, nationwide, assigning more than 4 million beneficiaries to the new entities.

Gerald Kominski, associate director of the UCLA Center for Health Policy Research, said the organizations are part of a larger movement by the federal government to eliminate inefficiencies in Medicare’s “fee for service” program. In fee for service, doctors make money by billing as much as they can, even if they duplicate services performed by other doctors in other settings.

“I think there is a lot of room for more efficiency. There seems to be a general recognition that they have to do a better job because Medicare’s current growth rate is not sustainable into the next decade.”

The Medicare expert added that there is some skepticism about whether this latest stab at controlling costs will work. In the past, he noted, attempts to pare back Medicare costs have caused prices to spike in other areas, like the cost of private insurance.

Three organizations, with a combined 43,800 assigned Medicare recipients, have been created in San Diego County.

The trio includes Sharp HeathCare; the North Coast ACO, which is run by Tri-City Medical Center in Oceanside; and San Diego Independent ACO, a group of 30 primary care doctors in South and East San Diego County.

Sharp is by far the largest, with 32,017 beneficiaries assigned to its ACO, which is one of 32 “pioneer” organizations that were first out of the gate on Jan. 1, 2012.

Alison Fleury, Sharp’s senior vice president of business development, said that Medicare has calculated a “baseline” value of $376 million for those 32,017 people, meaning that’s what the government expects to spend in a year given their current ages and a three-year history of previous claims.

As a pioneer ACO, Sharp agreed to put 10 percent — or about $37 million — of that total baseline amount at risk of bonus or penalty. If Sharp can save money, it will split those savings 60/40 with Medicare. If its claims come in higher than the baseline, then it owes the government a rebate, again up to a maximum of $37 million.

Though the program’s first year of operation is now complete, Fleury said she still does not know whether Sharp has lost or made money.

She said Medicare’s tracking reports for the first year of operation don’t accurately account for how many Medicare patients remain in the program. During the course of a year some die, others leave for different types of Medicare coverage and still others lose coverage. Medicare’s baseline is tied to a calculated cost of $11,700 per year per beneficiary, so the fewer people who are in the program, the lower the benchmark.

“At this time I cannot tell our board how the ACO is doing financially, but my expectation is that, in mid-February I will have a much better picture,” Fleury said.

Others are not so far along.

Standing in a small office in Spring Valley, Dr. Venu Prabaker is visibly excited at the prospect of getting a bonus for doing everything he, and his fellow doctors, can to keep people well.

“Every emergency room visit we can prevent is saving the system something like $16,000. Avoiding a hospital admission is saving more like $30,000,” said Prabaker, who is part of the San Diego Independent ACO.

Preventing admissions, he said, is a matter of closely following up with patients to make sure they are taking the correct medications at the right times and that they are coming in for regular checkups to catch new problems before they grow.

The group would split any savings with the government 50/50 and has the potential to earn up to $2.5 million in a year. Unlike pioneer ACOs, which get a 60/40 split, regular ACOs agree to receive a smaller share of the savings in exchange for receiving no penalty in the first two years of the three-year program.

Of course, one easy way to reduce expenditures per Medicare beneficiary is to simply deny treatment. But under the ACO program, doing so would be counterproductive.

The program includes a total of 33 performance measures that range from a patient’s opinion of the care their doctor provides to how well their blood pressure is controlled.

If organizations like San Diego Independent don’t meet the quality thresholds, they will get no bonus even if they do manage to shrink total Medicare billings.

Dr. Bryan Fox, another physician leader in the new organization, said he believes it is possible to meet the guidelines and still save money. He said some commercial insurance companies already have similar programs.

“We already do this with our senior HMO and commercial programs. Now, not only will we save money, but we will also reap some financial benefit,” Fox said.

For all ACOs the risk/reward calculation includes upfront costs that must be borne by the health organization out-of-pocket.

For Sharp, that has meant adding a host of new programs like conducting a fall assessment for each assigned patient, and hiring additional care coordinators to help patients better manage chronic diseases like diabetes, Fleury said.

Most of those additional services, she said, are not covered by Medicare. Sharp has spent more than $400,000 in the first year, and expects to spend $5 million this year, on services tailored to meeting the quality requirements.

Fleury said she does not expect to get a final decision on whether Sharp has earned a bonus until July.

While she said the delay is frustrating, the executive added that it’s important to understand that Sharp is participating in a pilot program that, if successful, could change the way health care is delivered nationwide.

“We spent a lot of time evaluating whether we wanted to go forward with this. Medicare’s not sustainable. We all know that. We wanted to be part of the solution. My greatest hope is that we’ve at least covered the cost of our involvement,” she said.

In same way, Fox and Prabaker said they know Medicare needs to change, and participating in that change is exciting.

“Someday we are all going to be retired and we want to stay in the community. We want somebody to be there to take care of us. We want Medicare to survive,” Prabaker said.

Accountable care organizations

What it is: An organization of physicians, hospitals and others that provide coordinated medical care for patients with Medicare Parts A and B. The goal is to improve the quality of care while cutting costs. Each ACO would be governed by a board representing medical providers, suppliers and Medicare patients.

Who participates: The federal government has approved more than 250 ACOs to date.

How money is saved: Officials estimate the program could save up to $960 million in three years by streamlining care, reducing redundancies and improving patient health. Officials say ACOs that show cost savings could be rewarded with $800 million over three years, but those that don’t meet targets could pay penalties of $40 million to Medicare.

What about patients: Patients within an ACO are free to go to any doctor, hospital or other facility that’s not in the ACO.

ACOs will be evaluated based on 33 quality standards, which are broken into four domains:

Patient/caregiver experience of care: seven measures, including how well your doctors communicate.

Care coordination and patient safety: six measures, including readmission rates.